COLUMN-Schlumberger outlines future roadmap for fracking: Kemp

Fri Apr 20, 2012 9:34am EDT

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By John Kemp

LONDON, Feb 20 (Reuters) - Hydraulic fracturing has already transformed the North American gas industry, and has the potential to revolutionise gas production and eventually oil output worldwide.

So far the approach has been based on brute force: employing ever-increasing amounts of horsepower, fracking fluid and sand to wring natural gas and oil from previously inaccessible tight rock formations in a manner that is wasteful, expensive and maximises the environmental impact.

However, in a speech last month, Schlumberger Chief Executive Paal Kibsgaard previewed a smarter approach in future that will cut costs, improve recovery rates and reduce negative effects associated with high water consumption and large numbers of truck movements ("Kibsgaard speaks at the 40th annual Howard Weil energy conference" March 26).

"We see hydraulic fracturing ... moving away from the current approach of trying to achieve more production with more resources, towards achieving more production with less resources. This will be essential to lower well costs and to reduce the operational footprint," according to Kibsgaard.

In effect, the Schlumberger chief executive sketched out a roadmap for the next phase of the shale industry, as it scales up from a niche business to a world-class one.

INDISCRIMINATE FRACKING

Until recently, fracking has proved highly profitable for both resource owners and the service companies contracted to do the drilling and frack jobs. But the existing model is now being squeezed by decade-low natural gas prices and the entry of a host of new firms able to do basic fracks.

"In North America, hydraulic fracturing and profitability have soared, purely as a function of the undersupply of horsepower, but they are now quickly coming under pressure as horsepower supply and demand approaches equilibrium," Kibsgaard warned ().

"The barrier to entry remains low, as seen by the number of smaller players in the market that buy generic frack fleets from third-party manufacturers and only pump basic fluid systems ... The pressure pumping industry is generally focused on the ability to do bigger and more resource intensive fracturing jobs, and on the ability to do jobs faster."

Drilling and fracking fees have been under pressure for the last six months, according to Kibsgaard. The downward trend is now starting to spread to liquid-rich basins, as oil and gas developers shift their focus from low-priced gas basins to areas yielding more crude and condensate.

Future profitability depends on cutting costs. Kibsgaard outlined three wasteful practices that need to be eliminated:

(1) Many wells are drilled in areas of shale plays with poor production potential and subsequently poor production results.

(2) Horizontal wells are completed along their entire lengths even though significant parts of the horizontal section are in zones with little production potential.

(3) Excessive amounts of horsepower and water are applied in "massive frack" jobs, creating fracture networks much deeper than can be propped open and where the unpropped part of the network makes little or no contribution to production.

SMARTER USE OF TECHNOLOGY

In future, fracking will make better use of seismic technology and computer-aided reservoir modelling to focus drilling on the parts of the shale formation which have most production potential. Only those parts of the horizontal section that cross zones with significant potential will be fracked. And massive fracks will be replaced by smaller, more targeted ones.

In an indication of how far the industry could improve efficiency, Kibsgaard said one customer in the Marcellus shale, in the north-eastern United States, had achieved 40 percent higher production compared to standard wells on the same pad by perforating the well casing and fracking only intervals around the best shale quality, instead of spreading them evenly along the whole horizontal length.

Schlumberger says its new HiWAY technology, introduced in the last year, uses 40 percent less proppant and 25 percent less water than conventional frack treatments. Proppant is sand or a similar substance mixed with water and used to hold open fissures in the shale created by fracking.

HiWAY has already been used in 5,000 fracks by 40 customers in 10 countries. "To date, HiWAY technology has eliminated the use of 6 million barrels of water and 340,000 tonnes of proppant ... HiWAY has saved more than 33,000 water and proppant hauling journeys to and from the well site," Kibsgaard said, reducing fuel consumption and providing relief for local communities.

COMMODITISED HORSEPOWER

In an intriguing twist, Kibsgaard suggested Schlumberger might reduce its involvement in pressure pumping, which is fast becoming commoditised, to specialise more in the more technically complex and higher-value added aspects of the business like the provision of advanced fracking fluids and reservoir modelling capability.

Kibsgaard highlighted the new frac fluid delivery model, recently introduced in North America, and used on 50 frack jobs so far. In frac fluid delivery, Schlumberger provides engineering and monitoring services, as well as chemicals and proppant, while the raw horsepower is provided by a third party.

"Although it is still early, we see the coupling of our unique Schlumberger fracturing fluid systems with non-Schlumberger hydraulic horsepower as an innovative approach that extends the reach of our technology without the investment in additional pumping capacity."

FUTURE OF FRACKING, SHALE

Kibsgaard's roadmap will be critically important as the tight gas oil industries seek to scale up from niche operations in Texas, North Dakota and a few other parts of North America to become world-scale industries supplying a significant proportion of gas and oil needs.

By reducing the volume of materials used, smart fracking can reduce the impact on local communities from shale gas and oil development, which will become increasingly important if the industry is to win acceptance and expand into more sensitive areas outside traditional oil and gas producing heartlands.

By cutting development costs, smart fracking could ultimately pull down the minimum gas and even oil prices the industry needs to break-even.

Ultimately, a more efficient approach will help speed up the industry's expansion by easing some of the current bottlenecks.

Fracking has already taken many outside observers of the oil and gas industries by surprise. But Kibsgaard's speech suggests the technology is still in its infancy, with plenty more potential to slash costs and improve efficiency as the industry replaces brute-force with a more sophisticated approach.

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Comments (1)
Nawaralsaadi3 wrote:
Schlumberger new philosophy seems very consistent with Gasfrac philosophy of using smarter technology to achieve better results; Gasfrac LPG technology eliminate the need for water; doesn’t require as much horse power, it has a smaller footprint, it reduces CO2 emissions, and it leads to higher production with less stages and less proppants.

Apr 20, 2012 11:29am EDT  --  Report as abuse
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